Electric-Car Incentives Are Shifting, And Vanishing in Some Cases

Will Tesla sales be affected when sales and tax incentives are no longer available to its buyers?

For the past eight years, North American car shoppers have enjoyed generous incentives for purchasing an electric car. Depending on your location, the combination of federal tax credits and local rebates could add up to $10,000 or more. However, the sand is shifting—with lawmakers imposing tighter restrictions on which buyers, vehicles, and automakers qualify for the perks. The shift represents a new phase of EV buying, in which incentives can no longer be guaranteed.

Buyers in the Canadian province of Ontario have benefitted from some of the world's most generous EV incentives. Rebates in Ontario range from about $5,000 to $7,000 for a plug-in hybrid, such as the Toyota Prius Prime—to $14,000 for a Nissan LEAF or Chevrolet Bolt. Those incentives for the purchase of an electric car or plug-in hybrid are now restricted to vehicles selling for below $75,000. Tesla's expensive models are not listed on Ontario's Ministry of Transportation Incentives page.

Devin Arthur, founder of the Greater Sudbury Electric Vehicle Association, told CBC Toronto that some units of the Tesla Model 3 might also be disqualified—even though its base price is $35,000. "Just from speaking to people in the industry, they're concerned that the Model 3 pricing might even approach that $75,000 pricing if you add on all the features," said Arthur. "So that's always a concern for people who don't necessarily know the upfront pricing yet."

California doesn't limit its $2,500 credit to cars based on the sticker price—but doesn't allow EV buyers who earn more than $150,000 as an individual (or $300,000 for joint filers) to qualify. Low-income EV buyers can qualify for an additional $500 of support.

In China, the government recently took steps to limit incentives to vehicles that provide greater driving distance on a single charge, while eliminating subsidies for vehicles offering less than about 60 miles of range.

Tesla Is the First

These developments represent a trend that will likely eliminate incentives for Tesla vehicles in the next couple of years. When any individual carmaker sells its 200,000th electric vehicle, the U.S. federal tax credit of $7,500 drops to $3,750 in the following six months—and is cut in half again in following six months, after which it entirely disappears. General Motors, which sells the Chevrolet Bolt EV and Chevy Volt plug-in hybrid, is also likely to reach 200,000 sales of electric cars and plug-in hybrids in 2018.

It remains to be seen how sales of Tesla and Chevy vehicles will be affected by the phase-out of the federal incentive—and how it might benefit other carmakers offering electric cars. "We have found that incentives are the number one reason why people buy these," Becky Bogard, a government relations consultant who lobbies for General Motors, told Oregon Public Broadcasting. "You have to get used to a new technology and you need something to make them try it. This is a particularly important incentive at this time because we are seeing some of the federal incentives go away."

The Washington state legislature could be on the verge of allowing its electric car incentives to expire. The tax break scheduled to expire in June allows buyers of qualifying plug-in vehicles to not pay sales tax on the first $42,500. This scheme—also designed to minimize help for buyers of expensive EVs—commonly nets tax savings of about $3,000 for its buyers. And in Oregon, a program to offer a $2,500 rebate to EV buyers is in limbo. Oregonians voted last year to pay for the EV incentive with a tax on general automobile sales. The Oregon Supreme Court is scheduled to hear oral arguments on the legality of the new tax.

Meanwhile, Southern California Edison announced in February that it's working with BMW to offer a whopping $10,000 rebate to customers who purchase a BMW i3 electric car before April 30. That's on top of the $450 check available to EV buyers directly from SCE—as well as the $7,500 federal tax credit and the state's $2,500 rebate.

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